Common Pricing Mistakes

Seven Mistakes That Can Quietly Erode Profitability

1. Applying the Same Markup to Every Client

Clients differ in volume, complexity, risk, recruiting difficulty, and service requirements. A universal markup ignores those differences.

Better approach: Establish a pricing methodology, then customize the inputs for each account.

3. Ignoring the Cost of Recruiting Difficulty

A role requiring repeated advertising, specialized sourcing, extensive screening, or many recruiter hours costs more to fill.

Better approach: Include cost-to-fill and expected turnover in account economics.

2. Treating Payroll Burden as a Fixed Number

Workers’ compensation classifications, unemployment taxes, local requirements, benefits, and other expenses can vary.

Better approach: Review burden assumptions by jurisdiction, role, and assignment.

4. Focusing on Revenue Instead of Contribution

A high-revenue client may also require high service costs, carry slow-paying receivables, or generate frequent replacements.

Better approach: Review revenue, gross margin dollars, contribution margin, payment performance, and resource consumption together.

6. Failing to Define Pricing Assumptions

Pricing may be based on expected volume, assignment duration, job requirements, shift structure, or payment terms. If those conditions change, the original rate may no longer work.

Better approach: Document the assumptions and include a process for reviewing material changes.

5. Discounting Before Understanding the Objection

A request for a lower rate could reflect a budget concern, a competitor comparison, or a lack of understanding about the service being delivered.

Better approach: Ask questions before reducing the rate. A change in scope, volume commitment, payment terms, or service model may solve the problem without sacrificing margin.

7. Never Revisiting Existing Rates

Payroll costs, insurance, technology, recruiting difficulty, and client requirements can change.

Better approach: Conduct periodic account reviews and revisit pricing when the economics materially change.

How to Defend Your Price

Move the Conversation Beyond Markup

Clients may look at the difference between pay rate and bill rate and assume the entire amount becomes profit.

A clear explanation can help. Explain that the bill rate supports:

  • Recruiting and sourcing
  • Candidate screening
  • Onboarding
  • Payroll administration
  • Employer payroll taxes
  • Workers’ compensation
  • Benefits
  • Insurance
  • Gross margin and profit
  • And more

Focus on Client Value

Rather than defending every cost line by line, connect your price to the business outcome.

Examples include:

  • Faster access to qualified talent
  • Reduced time-to-fill
  • Better worker retention
  • Greater schedule coverage
  • Lower internal recruiting burden
  • Reduced employment administration
  • Workforce flexibility
  • Specialized market expertise
  • Improved continuity during demand changes

Questions to Ask a Price-Sensitive Buyer

  • Which part of the proposed service is most important to you?
  • Is the concern the total rate, the worker pay rate, or the overall budget?
  • How are you measuring the cost of an unfilled position?
  • What service requirements are essential?
  • Would different volume or payment terms change the economics?
  • Are there parts of the process your internal team would prefer to manage?
  • What would make this engagement successful six months from now?

These questions move the discussion away from a single percentage and toward the complete value of the relationship.